MERUS N.V. Our management's discussion and analysis of our financial condition and results of operations are based upon our unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q, which have been prepared by us in accordance with accounting principles generally accepted inthe United States , orU.S. GAAP, and with Regulation S-X promulgated under the Securities Exchange Act of 1934, as amended, or Exchange Act. This discussion and analysis is intended to assist in providing an understanding of our financial condition, changes in financial condition and results of operations and should be read in conjunction with these unaudited condensed consolidated financial statements and the notes thereto included elsewhere in this Quarterly Report on Form 10-Q and the discussion and analysis included in our Annual Report on Form 10-K for the year endedDecember 31, 2020 , filed with theSEC onMarch 16, 2021 (the "Annual Report on Form 10-K"). Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report on Form 10-Q, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including those factors set forth in Part II, Item 1A. Risk Factors of this Quarterly Report on Form 10-Q, our actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. Overview General We are a clinical-stage oncology company developing innovative antibody therapeutics. Our pipeline of full-length human multi-specific antibody candidates are generated from our proprietary technology platforms, which are able to generate a diverse array of antibody binding domains, or Fabs, against virtually any target. Each antibody binding domain consists of a target-specific heavy chain paired with a common light chain. Multiple binding domains can be combined to produce novel bispecific and trispecific antibodies that bind to a wide range of targets and display novel and innovative biology. These platforms referred to as Biclonics® and Triclonics® allow us to generate large numbers of diverse panels of bispecific and trispecific antibodies, respectively, which can then be functionally screened in large-scale cell-based assays to identify those unique molecules that possess novel biology, which we believe are best suited for a given therapeutic application. Further, by binding to multiple targets, Biclonics® and Triclonics® may be designed to provide a variety of mechanisms of action, including simultaneously blocking receptors that drive tumor cell growth and survival and mobilizing the patient's immune response by engaging T cells, and/or activating various killer cells to eradicate tumors. Our technology platforms employ an assortment of patented technologies and techniques to generate human antibodies. We utilize our patented MeMo® mouse to produce a host of antibodies with diverse heavy chains and a common light chain that are capable of binding to virtually any antigen target. We use our patented CH3 domain dimerization technology to generate substantially pure multi-specific antibodies. We also employ our patented Spleen to Screen® technology to efficiently screen panels of diverse heavy chains, designed to allow us to rapidly identify Biclonics® and Triclonics® therapeutic candidates with differentiated modes of action for pre-clinical testing and clinical development. Using our Biclonics® platform we have produced, and are currently developing, the following candidates: MCLA-128, or zenocutuzumab, for the potential treatment of solid tumors that harbor Neuregulin 1 (NRG1) gene fusions; MCLA-158 or petosemtamab, for the potential treatment of solid tumors; MCLA-145, developed in collaboration with Incyte Corporation, for the potential treatment of solid tumors, and MCLA-129 for the potential treatment of solid tumors. Furthermore, we have a pipeline of proprietary antibody candidates in pre-clinical development and intend to further leverage our Biclonics® technology platform and Triclonics® technology platform to identify additional multi-specific antibody candidates and advance them to clinical development.
Funding Our Operations
We are a clinical-stage company and have not generated any revenue from product
sales. We expect to incur significant expenses and operating losses for the
foreseeable future as we advance our antibody candidates from discovery through
pre-clinical development and into clinical trials, and seek regulatory approval
and pursue commercialization of any approved antibody candidate. In addition, if
we obtain regulatory approval for any of our antibody candidates, if
appropriate, we expect to incur significant commercialization expenses related
to product manufacturing, marketing, sales and distribution.
We anticipate that we will require additional financing to support our
continuing operations. Until such time as we can generate significant revenue
from product sales, if ever, we expect to finance our operations through a
combination of public or private equity or debt financings or other sources,
which may include collaborations, business development and licensing
opportunities with third parties. Adequate additional financing may not be
available to us on acceptable terms, or at all. For example, the trading prices
for our and other biopharmaceutical companies' stock have been highly volatile
as a result of the COVID-19 pandemic. As a result, we may face difficulties
raising capital through sales of our common stock and any such sales may be on
unfavorable terms. See "Impact of COVID-19 Pandemic" below and "Risk
Factors-Risks Related to Our Business and Industry-The COVID-19 pandemic caused
by the novel coronavirus has and may continue to adversely impact our business,
including our pre-clinical studies and clinical trials, financial condition and
results of operations" in Part II, Item 1A of this Quarterly Report on Form
10-Q. Our inability to raise capital
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--------------------------------------------------------------------------------as and when needed would have a negative impact on our financial condition and our ability to pursue our business strategy. We will need to generate significant revenue to achieve profitability, and we may never do so.
Based on our current operating plan, we expect that our existing cash, cash
equivalents and marketable securities of
Clinical Programs
Zenocutuzumab, or "Zeno" (MCLA-128: HER3 x HER2 Biclonics®)
Phase 2 part of the phase 1/2 trial continues: update planned for 1H 2022
In the third quarter of 2021, we met with the FDA in an end-of-phase Type B
meeting to discuss interim results from the ongoing phase 1/2 eNRGy trial and
Early Access Program (EAP) in NRG1 fusion (NRG1+) cancers, and to discuss the
development plan for Zeno. Merus and the FDA officials discussed the available
Zeno monotherapy data and a potential data package to support a biologics
license application (BLA) submission.
o Merus designed the phase 1/2 eNRGY trial to support potential
registration in either a tumor-specific or a tumor agnostic NRG1+
indication(s). Based on the feedback received from the FDA, webelieve
that the trial design and planned enrollment will be appropriate to
potentially support a BLA submission seeking a tumor agnostic
indication for Zeno in patients with previously treated NRG1+
cancers. We also believe that, if the rate of enrollment and efficacy
remains consistent, a sufficient number of patients will be enrolled
in the eNRGy trial and EAP, and will have accrued sufficient follow up
by mid-2022, that could provide a potential registrational data set.
As of
We plan to provide a further clinical program update in the first half of 2022.
InAugust 2020 , Zeno was granted Orphan Drug Designation by theU.S. Food and Drug Administration for the treatment of pancreatic cancer and inJanuary 2021 , we announced that Zeno received Fast Track Designation for the treatment of patients with metastatic solid tumors harboring NRG1 gene fusions that have progressed on standard-of-care therapy. Also in the third quarter of 2021, we presented preclinical data on Zeno at the 2021AACR-NCI-EORTC Virtual International Conference on Molecular Targets and Cancer Therapeutics . The bispecific HER2/HER3 antibody Zeno blocked cell growth 100 fold more potently than the bivalent HER3 antibody derived from Zeno, in an NRG1 driven growth assay, and potently blocked NRG1-fusion mediated downstream signaling and growth in vitro and in vivo models. Zeno induced both antibody-dependent cellular cytotoxicity (ADCC) and antibody-dependent cellular phagocytosis (ADCP) mediated killing of cancer cells in a dose-dependent manner.
MCLA-158 (petosemtamab: Lgr5 x EGFR Biclonics®): Solid Tumors
Phase 1 trial continues: dose expansion cohorts ongoing: update planned for 2022
The phase 1 open label, multicenter clinical trial of MCLA-158 is ongoing in the dose expansion phase. Enrollment of patients continues.
We shared early interim clinical data of our MCLA-158 program in patients with advanced HNSCC at the 2021AACR-NCI-EORTC Virtual International Conference on Molecular Targets and Cancer Therapeutics . Among 10 patients with previously treated advanced head and neck squamous cell carcinoma (HNSCC), as of theAugust 9, 2021 safety and efficacy data cutoff, the median age was 65 and the median number of prior lines of therapy was two. Seven patients were evaluable for an interim efficacy analysis by investigator assessment (three patients were enrolled <8 weeks from the cutoff date). Three of seven patients achieved a best response of partial response, with one achieving complete response after the data cutoff date. Tumor reduction was observed in the target lesions for all seven patients. The safety results presented for MCLA-158 were based on 29 patients with advanced solid tumors who were treated at 1500 mg every two weeks across the phase 1 trial. The most frequent adverse events (AEs) were infusion related reactions with 72% any grade and 7% grade 3 or greater. Mild to moderate skin toxicity (3% grade ?3) was also observed.
We plan to provide an update at a medical conference in the in 2022.
MCLA-145 (CD137 x PD-L1 Biclonics®): Solid Tumors
Phase 1 trial continues: update planned for
16
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The phase 1, open-label, single-agent clinical trial of MCLA-145 is ongoing and
consists of a dose escalation phase, to be followed by a planned dose expansion
phase. MCLA-145 is the first drug candidate co-developed under our global
collaboration and license agreement with Incyte Corporation, which permits the
development and commercialization of up to 11 bispecific and monospecific
antibodies from the Merus Biclonics® platform. We retain full rights to develop
and commercialize MCLA-145, if approved, in the United States ; and Incyte holds
full rights to develop and commercialize MCLA-145 outside the United States . We
plan to provide an update in the fourth quarter of 2021 at the ESMO
Immuno-Oncology Congress .
MCLA-129 (EGFR x c-MET Biclonics®): Solid Tumors
Phase 1 trial ongoing in patients with solid tumors.
The phase 1/2, open-label, single-agent clinical trial of MCLA-129 is ongoing and consists of a dose escalation phase, to be followed by planned expansion cohorts evaluating MCLA-129 for the treatment of patients with advanced non-small cell lung cancer (NSCLC) and other solid tumors. MCLA-129 is a Biclonics®, which binds to EGFR and c-MET and is being investigated for the treatment of solid tumors. EGFR is an important oncogenic driver in many cancers, and upregulation of c-MET signaling has been associated with resistance to EGFR inhibition. We plan to provide an update after the recommended phase 2 dose has been reached.
MCLA-129 is subject to a collaboration and license agreement with Betta
Pharmaceuticals Co. Ltd. (Betta), which permits Betta to exclusively develop
MCLA-129 in
InOctober 2021 , Betta announced that the first patient was dosed in Betta's sponsored phase 1/2 trial of MCLA-129 inChina in patients with advanced solid tumors.
Impact of COVID-19 Pandemic
The current COVID-19 pandemic has presented a substantial public health and
economic challenge around the world and is affecting our employees, communities,
clinical trial sites and business operations, as well as the
While we are currently continuing our ongoing clinical trials, the COVID-19 pandemic and related precautions have directly or indirectly impacted enrollment, new, planned clinical trial site openings, patient visits, and on-site monitoring of our clinical trials and source verification of clinical data required for presentation of clinical data for zenocutuzumab, MCLA-158, MCLA-145 and MCLA-129. We continued to observe a moderate to high impact on clinical trial enrollment and operations as a consequence of the COVID-19 pandemic during the quarter endedSeptember 30, 2021 , particularly at sites in countries not yet open to recruitment, and to a lesser extent in countries where COVID-19 related restrictions have been eased, with adjustments made to allow remote visits for some patient follow-up, and reduced onsite monitoring by the sponsor or contract research organization (CRO). As a result of the COVID-19 pandemic, we may experience further disruptions that could severely impact our business, preclinical studies and clinical trials. The extent of the impact to our overall clinical development timeline is uncertain at this time and we continue to monitor and assess the COVID-19 pandemic on a regular basis. As a result of the COVID-19 pandemic, certain of our CROs and third-party suppliers, as well as collaborators in theU.S. andChina that are developing or collaborating with us to develop certain of our pre-clinical antibody candidates have been affected. As a result of such impact, we may face difficulties with and delays in performance of certain chemistry manufacturing and controls and testing of our antibody candidates, including those associated with our collaborations with Incyte, Lilly, Betta and Simcere, which may delay or prevent their potential clinical development. While we currently do not anticipate any interruptions in our clinical trial supply of drug candidates, it is possible that the COVID-19 pandemic and response efforts may cause delays or otherwise have an impact in the future on our third-party suppliers and contract manufacturing partners' ability to manufacture our clinical trial supply or source materials necessary for their manufacture. In response to the spread of COVID-19, onMarch 18, 2020 , we temporarily suspended our laboratory research activities at our facilities inUtrecht, the Netherlands to help secure the safety of our employees and to adhere to government recommendations of social distancing and limited public exposure in connection with the COVID-19 pandemic. We have since re-opened our offices and laboratory inUtrecht , maintaining social distancing and imposing other requirements consistent with government guidance. Further, we require our employees in theU.S. andNetherlands follow requirements consistent with the guidance provided by theCenter for Disease Control and Prevention (CDC ), federal, state and local regulations for theU.S. andDutch National Institute for Health and Environment or Het Rijksinstituut voor Volksgezondheid en Milieu (RIVM) forthe Netherlands . While we use reasonable business practices to mitigate the risk of exposure to COVID-19 while on Company-operated premises, we cannot guarantee that traveling to and from and visiting the offices will not expose employees to infectious agents or eliminate inherent risks to our workforce and our business operations resulting from COVID-19. Given the uncertainty caused by the COVID-19 pandemic we cannot be certain that we will not suspend our laboratory research activities at our facilities or suspend use of our offices in the future. At this time, there is significant uncertainty caused by the COVID-19 pandemic and impact of related responses. The future impact of COVID-19 on our business and clinical trials will largely depend on future developments, which are highly uncertain and cannot be predicted with confidence, such as the spread of the disease, availability and effectiveness of vaccines, arising variants, and their 17 -------------------------------------------------------------------------------- impact on vaccination efforts, the duration of the pandemic, travel restrictions and social distancing inthe Netherlands ,the United States and other countries, business closures or business disruptions, the ultimate impact of COVID-19 on financial markets and the global economy, and the effectiveness of actions taken inthe Netherlands ,the United States and other countries to contain and treat the disease. See "Risk Factors-Risks Related to Our Business and Industry-The COVID-19 pandemic caused by the novel coronavirus has and may continue to adversely impact our business, including our pre-clinical studies and clinical trials, financial condition and results of operations." in Part II, Item 1A of this Quarterly Report on Form 10-Q.
Collaborations
Refer to Item 1, "Business-Our Collaborations" and Note 12, "Collaborations," of the notes to our consolidated financial statements included in our Annual Report on Form 10-K and Note 8, "Collaborations," to our unaudited condensed consolidated interim financial statements elsewhere in this Quarterly Report on Form 10-Q for a description of the key terms of our arrangements.
Discussion and Analysis of our Results of Operations
Comparison of the three and nine months ended
Revenue
The following is a comparison of revenue:
Three Months Ended Nine Months Ended
September 30, September 30,
2021 2020 Change 2021 2020 Change
(In millions) (In millions)
Incyte $ 7.8 $ 7.9 $ (0.1 ) $ 21.8 $ 19.7 $ 2.1
Lilly 5.0 - 5.0 11.0 - 11.0
Other 0.9 0.7 0.2 1.6 1.2 0.4
Total revenue 13.7 8.6 5.1 34.4 20.9 13.5
Collaboration revenue for the three months ended September 30, 2021 increased by
$5.1 million as compared to the three months ended September 30, 2020 ,
substantially as a result of an increase from a Lilly upfront payment
amortization and reimbursement revenues that commenced in the first quarter of
2021. The change in exchange rates did not significantly impact collaboration
revenue.
Collaboration revenue for the nine months ended September 30, 2021 increased by
$13.5 million as compared to the nine months ended September 30, 2020 , primarily
as a result of an increase from a Lilly upfront payment amortization and
reimbursement revenues of $11.0 million that commenced in the first quarter of
2021, and $1.0 million of milestone revenue related to Incyte reflecting
activities in the period. The change in exchange rates did not significantly
impact collaboration revenue.
As of September 30, 2021 , we had total deferred revenue of $113.1 million , which
primarily relates to the upfront payment received under our Incyte collaboration
agreement and Lilly collaboration agreement and is expected to be recognized
over the next five and three years, respectively.
Operating Expenses
The following is a comparison of operating expenses:
Three Months Ended Nine Months Ended
September 30, September 30,
2021 2020 Change 2021 2020 Change
(In millions) (In millions)
Research and development $ 26.0 $ 17.5 $ 8.5 $ 71.4 $ 48.2 $ 23.2
General and administrative 10.2 9.1 1.1 30.1 26.1 4.0
Total operating expenses $ 36.2 $ 26.6 $ 9.6 $ 101.5 $ 74.3 $ 27.2
Research and development expense for the three months ended September 30, 2021
increased by $8.5 million as compared to the three months ended September 30,
2020 , primarily as a result of an increase in clinical and manufacturing costs
related to our programs and stock-based compensation.
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Research and development expense for the nine months ended September 30, 2021
increased by $23.2 million as compared to the nine months ended September 30,
2020 , primarily as a result of an increase in clinical and manufacturing costs
related to our programs and stock-based compensation.
General and administrative expense for the three months ended September 30, 2021
increased by $1.1 million as compared to the three months ended September 30,
2020 , primarily as a result of an increase in stock-based compensation and other
personnel related expenses, partially offset by decreases in legal and
depreciation expenses.
General and administrative expense for the nine months ended September 30, 2021
increased by $4.0 million as compared to the nine months ended September 30,
2020 , primarily as a result of an increase in stock-based compensation and other
personnel related expenses as well as facilities and professional fees,
partially offset by decreases in legal and IP related costs and depreciation
expenses.
Other (Loss) Income, Net
The following is a comparison of other (loss) income, net:
Three Months Ended Nine Months Ended
September 30, September 30,
2021 2020 Change 2021 2020 Change
(In millions) (In millions)
Interest (expense) income, net $ - $ - $ - $ (0.1 ) $ 0.4 $ (0.5 )
Foreign exchange (losses) gains, net 7.8 (4.8 ) 12.6 15.4 (4.2 ) 19.6
Other losses, net (0.1 ) - (0.1 )
(0.5 ) - (0.5 )
Total other (loss) income, net
Other (loss) income, net consists of interest earned and fees paid on our cash and cash equivalents held on account, accretion of investment earnings and net foreign exchange (losses) gains on our foreign denominated cash, cash equivalents and marketable securities. Other gains or losses relate to the issuance and settlement of financial instruments.
Income Tax Expense
The following is a comparison of income tax expense:
Three Months Ended Nine Months Ended
September 30, September 30,
2021 2020 Change 2021 2020 Change
(In millions) (In millions)
Current $ 0.1 $ 0.3 $ (0.2 ) $ (0.1 ) $ 0.3 $ (0.4 )
Deferred (0.1 ) (0.1 ) - 0.2 - 0.2
Total tax expense (benefit), net $ - $ 0.2 $ (0.2 ) $ 0.1 $ 0.3 $ (0.2 )
We are subject to income taxes in the Netherlands and the U.S. Our current and
deferred tax provision represents taxable income attributed to our U.S.
operations as a consequence of allocating income to that jurisdiction. No
current or deferred provision for income taxes has been made for income taxes in
the Netherlands due to losses for tax purposes. Further, given a history of
losses in the Netherlands , no deferred tax assets in excess of deferred tax
liabilities are recognized as we believe it is not more likely than not that
they will be recovered.
Net Loss
Net loss for the three and nine months ended September 30, 2021 was $14.9
million and $52.4 million , respectively, compared to net loss for the three and
nine months ended September 30, 2020 of $23.1 million and $57.5 million ,
respectively. The change in net loss was primarily due to the change in
collaboration revenue, changes in operating expenses and changes in other (loss)
income, net, as discussed above.
Material Changes in Financial Condition
Sources of Cash
As ofSeptember 30, 2021 , we had$333.2 million in cash, cash equivalents and marketable securities that are available to fund our current operations. In addition to our existing cash, cash equivalents and marketable securities, we may receive research and development co-funding and are eligible to earn a significant amount of milestone payments under our collaboration agreements and 19 --------------------------------------------------------------------------------
research license agreements. Our ability to earn these payments and the timing of earning these payments is dependent upon the outcome of our research and development activities and is uncertain at this time.
OnJanuary 18, 2021 , the Company entered into a Collaboration and License Agreement (the "Collaboration Agreement") and Share Subscription Agreement (the "Subscription Agreement") with Eli Lilly and Company, anIndiana corporation ("Eli Lilly"). InFebruary 2021 , Eli Lilly paid an upfront, non-refundable payment of$40 million , for the rights granted under the Collaboration Agreement. Eli Lilly will fund the research and development activities to be conducted by the Company for each program under an agreed research plan and budget. With respect to each product arising from each program, the Company is eligible to receive up to$290 million in future contingent development and regulatory milestones and up to$250 million in commercial sales milestones, for a total of up to approximately$1.6 billion for a single product generated from all three programs. The Company is further eligible to receive, on a product-by-product and country-by-country basis, tiered royalties based on the level of worldwide aggregate annual net sales at percentages ranging from the mid-single digits to low double digits until the royalty term expires. In connection with entering into the Collaboration Agreement, pursuant to the Subscription Agreement, onJanuary 18, 2021 , Eli Lilly agreed to purchase 706,834 common shares of the Company at a price per share of$28.295 for aggregate gross proceeds to the Company of approximately$20 million . Eli Lilly agreed not to transfer, sell, or otherwise dispose of the shares for a period of time following the closing date, subject to certain customary exceptions. OnJanuary 21, 2021 , the Company entered into an underwriting agreement withJefferies LLC andSVB Leerink LLC , as representatives of the several underwriters named therein (collectively, the "Underwriters"), in connection with the issuance and sale by the Company in a public offering of 4,848,485 common shares of the Company, nominal value €0.09 per share, at a public offering price of$24.75 per share, less underwriting discounts and commissions. The Company also granted the Underwriters an option exercisable for 30 days to purchase up to an additional 727,272 common shares at the public offering price, less underwriting discounts and commissions. OnJanuary 21, 2021 , the Underwriters exercised this option in full. The closing of the offering occurred onJanuary 25, 2021 , resulting in aggregate net proceeds to the Company of$129.4 million .
Funding Requirements
Our primary uses of capital are, clinical trial costs, chemistry manufacturing and control costs to manufacture and supply drug product for our clinical trials, third-party research and development services, laboratory and related supplies, financial services, legal and other regulatory expenses and general overhead costs. Because our product candidates are in various stages of clinical and pre-clinical development and the outcome of these efforts is uncertain, we cannot estimate the actual amounts necessary to successfully complete the development and commercialization of our product candidates or whether, or when, we may achieve profitability. In addition, the magnitude and duration of the COVID-19 pandemic and its impact on our liquidity and future funding requirements is uncertain as of the filing date of this Quarterly Report on Form 10-Q, as the pandemic continues to evolve globally. See "Impact of COVID-19 Pandemic" above and "Risk Factors-Risks Related to Our Business and Industry-The COVID-19 pandemic caused by the novel coronavirus has and may continue to adversely impact our business, including our pre-clinical studies and clinical trials, financial condition and results of operations" in Part II, Item 1A of this Quarterly Report on Form 10-Q for a further discussion of the possible impact of the COVID-19 pandemic on our business.
Until such time, if ever, as we can generate substantial product revenues, we expect to finance our cash needs through a combination of equity or debt financings, collaboration arrangements, license agreements, other business development opportunities with third parties.
Except for any obligations of our collaborators or licensees to make license, milestone or royalty payments under our agreements with them, we do not have any committed external sources of liquidity and currently have no credit facility. To the extent that we raise additional capital through the future sale of equity or debt, the ownership interest of our stockholders may be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our existing common stockholders. Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we raise additional funds through collaboration arrangements, license agreements or other business development opportunities in the future, we may have to relinquish valuable rights to our technologies or intellectual property, future revenue streams or product candidates or grant licenses on terms that may not be favorable to us. If we are unable to raise any additional funds that may be needed through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.
Outlook
Based on our current operating plan, research and development plans and our timing expectations related to the progress of our programs, we expect that our existing cash, cash equivalents and marketable securities as ofSeptember 30, 2021 will fund the Company's operations into the second half of 2024, without giving effect to any potential milestone payments we may receive under our collaboration and license agreements. We have based this estimate on assumptions that may prove to be wrong, particularly as the process of testing product candidates in clinical trials is costly and the timing of progress in these trials is uncertain and in light of the 20 --------------------------------------------------------------------------------
uncertainties associated with the magnitude and duration of the COVID-19 pandemic. As a result, we could use our capital resources sooner than we expect.
Cash Flows
The following is a summary of cash flows:
Nine Months Ended
September 30,
2021 2020 Change
(In millions)
Net cash used in operating activities $ (28.0 ) $ (55.6 ) $ 27.6
Net cash used in investing activities (130.9 ) (7.4 ) (123.5 )
Net cash provided by financing activities 154.9 0.8 154.1
Net cash used in operating activities during the nine months ended September 30,
2021 decreased by $27.6 million as compared to the nine months ended
September 30, 2020 , primarily due to operating cash receipts related to revenue
arrangements principally from the receipt of payments received from Eli Lilly of
which $43.5 million relates to deferred revenue, partially offset by operating
expenses during the period.
Net cash used in investing activities during the nine months ended September 30,
2021 principally reflects $204.5 million of purchases of marketable securities
partially offset by maturities of marketable securities of $74.1 million .
Net cash provided by financing activities during the nine months ended
September 30, 2021 increased primarily due to proceeds received from the
issuance of common stock of $129.6 million , proceeds from the stock issuance to
Eli Lilly of $16.5 million , and an increase in stock option exercise proceeds of
$8.1 million .
Critical Accounting Policies and Use of Estimates
Our critical accounting policies are described under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations-Critical Accounting Policies" in our Annual Report on Form 10-K and in Note 2 to our consolidated financial statements included in the Annual Report on Form 10-K. As disclosed in Note 2 to our consolidated financial statements included in the Annual Report on Form 10-K, the preparation of financial statements in conformity withU.S. GAAP requires management to make estimates and assumptions about future events that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ significantly from those estimates. During the period covered by this Quarterly Report on Form 10-Q, there were no material changes to our critical accounting policies from those discussed in our Annual Report on Form 10-K, other than updating our use of the option pricing model and associated estimates as described in Note 9 to our unaudited condensed consolidated interim financial statements included elsewhere in this Quarterly Report on Form 10-Q.
Recently Adopted Accounting Pronouncements
For detailed information regarding recently issued accounting pronouncements and the expected impact on our condensed consolidated financial statements, see Note 2, Summary of Significant Accounting Policies-Pending Accounting Pronouncements, in the accompanying notes to the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.
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